Now that the legislature has satisfied the State Supreme Court’s McCleary order, it now faces another court order to remove hundreds of fish barriers by 2030. As with McCleary, state policymakers are searching for the money to pay for it. Not only has the legislature repeatedly raided an account for public infrastructure projects to plug gaps in the operating budget, but the price tag for removing those barriers keeps going up. The latest estimate by the Washington State Department of Transportation (WSDOT) puts it at around $3.8 billion.
A move proposed by Governor Jay Inslee to help cover the costs is to amend the state’s real estate excise tax (REET) to a graduated rate is being challenged by business and forestry members testifying at SB 5130’s Feb. 6 public hearing in the Senate Transportation Committee who argue that if not illegal, could still make property even less affordable.
“What does the sale of existing property have to do with fish passage?” Association of Washington Business Government Affairs Director for Tax & Fiscal Policy Clay Hill asked. He added that “if it (the tax) doesn’t violate squarely the constitutional provisions requiring uniformity on property taxation, then it does so as a matter of principle.”
Sponsored by Senate Ways and Means Chair Christine Rofles (D-23) and cosponsored by Majority Leader Rebecca Saldaña (D-37), SB 5130 would eliminate the current flat rate of 1.28 percent and replace it with a new graduated rate as follows:
- .75 percent for properties $250,000 or less;
- 28 percent for properties between $250,000-$1 million;
- Two percent for properties between $1 million-$5 million; and,
- 5 percent for properties more than $5 million.
If passed, the restructured tax would raise an estimated $435.5 million for the 2019-21 biennium, and $473 million for the 2021-23 biennium. Much of that revenue would be deposited into the motor vehicle account.
However, Hill warned that redirecting that revenue would deprive the general fund of money, some of which would go to replenish the rainy-day fund meant to help balance budgets if the state experiences revenue deficits.
It could also mean an end to years of surplus REET revenue, according to Greg Hanon with the National Association of Industrial and Office Properties. He told lawmakers that reports by the state Economic and Revenue Forecast Council (ERFC) for the past several years have shown higher-than-expected revenue generated by the sales of large commercial properties.
“Washington already has one of the highest REETs in the country,” he added. “Has there been any analysis to suggest how a 95 percent increase of this rate will translate to future forecasted property sales revenues? Consider also that these taxes may well be passed on to renters of apartment buildings and business tenants of commercial buildings. An already high rental market could become even less affordable.”
Sen. Curtis King (R-14) offered a similar view during the public hearing. “We’re talking about the price of homes in King county and Seattle and how they’re going, going, up, up and nobody can afford them, and here we want to add to the costs of those homes.”
Part of the bill could also fall at the feet of private forestland managers who have already collectively invested $200 million to remove 8,000 fish barriers on their properties since 2000 as part of the 1999 Forests and Fish Act. That’s according to Washington forest Protection Association Director of Forest Taxation and Economics John Ehrenreich.
“We’ve spent a lot of money doing it,” he told committee members. “We don’t think that maybe raising more money on us to go further is the appropriate thing to do.”
Complicating the situation is the fact that while the legal mandate applies to only certain culverts on land managed by WSDOT, cities and counties have thousands of fish barriers that may be subject to a similar injunction. That possibility has led to calls by local government officials for a more comprehensive approach to replacing fish passages.
“We’re here to ask you to take a broader vision to the culvert issue,” Association of Washington Cities Government Relations Advocate Carl Schroeder told committee members.
No further action is scheduled for the bill at this time.